چکیده انگلیسی

The Australian electricity industry experienced significant structural change during the 1990s mainly as a result of microeconomic reform. We analyse the effects of the structural change on the distribution of household income using a macro–micro approach. Our work shows that, nationwide, all income deciles experience higher real incomes in the order of 2%. Our results show that a previously state-owned monopoly industry can experience significant structural change while generating significant improvements in household real income without leading to significantly adverse impacts on national or regional income inequality. It suggests that policy makers in advanced economies should seriously consider such reforms given that they may generate large economic benefits with rather small economic costs.

مقدمه انگلیسی

In the early 1990s, Australian governments1 introduced a series of microeconomic reform policies for infrastructure industries: electricity, gas, water and sewerage, urban transport, ports and rail freight, and telecommunications; PC (2002) summarises these reforms. The reforms were part of the process inspired by the Hilmer Report (Commonwealth of Australia, 1993). The Hilmer Report's terms of reference focused on government businesses and regulations that had created protected enterprises: these had been a feature of industry policy in Australia for most of the 20th century. Hilmer argued for the introduction of competition policy in these areas to increase competition for the purpose of promoting economic efficiency and other social goals (King and Maddock, 1996). Thus, a major aim of the policy initiatives was to spur productivity improvements and attendant increases in real incomes, as well as better choice and services for consumers. Since the initial introduction of the reforms, the affected industries have undergone significant structural changes that are observable in their cost structure and output prices (PC (Productivity Commission), 2002, Giesecke and Madden, 2004 and Aghdam, 2011).
As major service providers, changes in infrastructure industries can potentially have far-reaching impacts on other industries, businesses and households. Both PC (1999) and Madden (2000) noted that the competition policy reforms were regarded by many in the community as being responsible for the increased economic divide between capital cities and regional Australia. Related to this view, there has also been community concern over the impact on income distribution of sectoral changes, in general, and infrastructure industry changes, in particular, viewed as a result of the microeconomic reforms. Such concern has also been expressed by the economics profession, e.g., Quiggin (1997). Our interest is to address this concern by estimating the effects on income distribution of these changes: we focus on the electricity industry, which is an important supplier for most sectors in an advanced economy.
Given the interdependence of the electricity industry and other sectors, our approach applies an economywide framework with a high degree of sectoral detail and inter-sectoral linkages: i.e., computable general equilibrium (CGE). CGE analysis of reforming infrastructure industries is rather uncommon: examples include Argentina's utilities sectors (Benitez et al., 2003); Bolivia's gas sector (Andersen and Faris, 2002); Morocco's rural areas (Löfgren et al., 1997); Australia's utilities sectors (Giesecke and Madden, 2004); and Australia's electricity industry (Whiteman, 1999). Analysing the distributional effects of such reforms within a CGE framework is even less common: Boccanfuso et al. examine the impact of electricity industry reform on income distribution in Senegal (Boccanfuso et al., 2009a) and Mali (Boccanfuso et al., 2009b).
In an Australian context, there are two studies that have analysed the distributional effects of certain aspects of structural change in the electricity industry. PC (1996a) uses an input–output model and household survey data to estimate the effects on household expenditure of price reforms by government trading enterprises (GTEs) in the electricity industry and other utilities. PC (1996b) uses a CGE model in conjunction with an income distribution model to analyse the effects of a range of reforms including the electricity industry. Each of these studies concentrates on only one side of the household budget – PC (1996a) focuses on the expenditure side, PC (1996b) on the income side – so the overall impact on household real income remains unclear in each study. Moreover, input–output models, as applied in PC (1996a), suffer from their own limitations: they do not capture effects generated from sectoral reallocation of resources, particularly labour, that are considered important in capturing the distributional effects of a policy change; and they assume no behavioural responses when relative prices change.
We conduct a more comprehensive analysis of the effects of Australian electricity industry changes on household income distribution. We integrate both sides of the household budget to capture the total (direct and indirect) effect on household real income, by incorporating expenditure and income data on individual households within a multi-region CGE model. Within this framework we simulate the electricity-industry-specific changes during the 1990s to generate region-specific changes in the prices of goods and services, and productive factor returns and usage. Region-specific prices and other variables calculated by the CGE model are linked in a top–down manner to expenditure prices, employment and factor returns at the household level.
Our approach is typically referred to as macro–micro (Boccanfuso et al., 2009a and Boccanfuso et al., 2009b). Within this class of analysis, it is most accurately sub-classed as a form of the CGE micro-simulation sequential approach (e.g., Chen and Ravallion, 2004), also known as CGE micro-accounting. In CGE micro-accounting, the representation of households is purely an accounting framework with no behavioural responses. Our work represents the first attempt to analyse the distributional effects of electricity reform in an advanced economy within a CGE framework that incorporates both sides of the household budget. Our work is also the first to analyse the distributional effects of Australian electricity reform with a regional dimension.

نتیجه گیری انگلیسی

We analyse the effects on household income distribution of changes in the Australian electricity industry during the 1990s; these changes were mainly the result of microeconomic reform. Our analytical framework applies a (macro–micro) CGE micro-accounting approach. Our results show that the changes have benefitted households in almost every income decile in all regions; the national benefit is in the order of 2%. Nevertheless, these benefits come at the expense of a small increase in income inequality in nearly all regions, with the national Gini coefficient estimated to have increased slightly by 0.3%. Systematic sensitivity analysis indicates that the distributional and welfare impacts are robust with respect to variations in model parameters. In contrast, ad hoc sensitivity analysis indicates that the distributional and welfare impacts do vary with different closure choices.
We estimate that structural change in the electricity industry significantly improves productivity in the use of all inputs, particularly labour inputs. The improvement in productivity lowers the price of electricity and other goods and services. Lower prices benefit low income households more than high income households. The improvement in productivity also increases nominal income; higher income households benefit more from this effect than lower income households. The income effects are much stronger than the price effects and, as a result, the overall distributional effects favour high income households more than low income households.
We estimate a slight increase in income inequality and rather significant increases in real household income. Contemporaneous criticisms of the microeconomic reforms emphasised that although they might lead to productivity gains, “…the dominant flow-on effects…will be negative, arising from the fact…some of the workers directly displaced by the reforms will be permanently displaced from the employed labour force” (Quiggin, 1997, p. 256). In the case of the electricity industry, we find that whilst some displaced workers are reemployed at lower wages, most workers experience higher wages and an improvement in employment prospects. Consequently, our work suggests that the dominant flow-on effect of the reforms on the electricity industry was positive in the welfare metric of real household income.
Our findings contrast with previous studies that examine the distributional effects of electricity reforms using a macro–micro approach. Boccanfuso et al., 2009a and Boccanfuso et al., 2009b find that electricity reforms in Senegal and Mali lead to lower income for households, as they consider scenarios that encompass large electricity price increases for the purpose of reducing the large losses experienced by the electricity operator. Thus, our work is not directly comparable to that of Boccanfuso et al., 2009a and Boccanfuso et al., 2009b. Besides this caveat, like Boccanfuso et al., 2009a and Boccanfuso et al., 2009b, we do find that the indirect effects (via changes in factor returns) dominate the direct effects (via changes in commodity prices), and that the reforms lead to rather small effects on income inequality.
Our work makes a number of contributions. One, it adds to the few studies of the distributional impact of electricity industry reform and infrastructure industry reform. Two, it represents a methodological advance on existing Australian studies of the distributional impact of microeconomic reform of infrastructure industries: it estimates both the expenditure and income effects on the household budget rather than just one of these effects; it adds a regional dimension that is also lacking in previous studies. Three, we have estimated the effects on an important infrastructure industry of a policy change that was strongly resisted for nearly a century by Australian governments, their constituents and many economists. We show that a previously state-owned monopoly industry can experience significant structural change whilst generating significant improvements in household real income without leading to large adverse impacts on national or regional income inequality: this is an important research finding. It suggests that policy makers in advanced economies should seriously consider such reforms given that they may generate large economic benefits with rather small economic costs.